Chicago-based Stoltmann Law Offices has represented investors for fifteen years in arbitration cases against their brokerage firms and investment advisory firms to recover investment losses. In times like these, when the stock market heaves violently downward, it is retired investors and the elderly who fall victim to what was years of mismanagement and negligence. There is an old saying: “Everyone is a genius in a bull market”. In times like this, we are reminded of another quote from the incomparable Warren Buffett: “Only when the tide goes out do you discover who’s been swimming naked.”
For the better part of the last decade, investment and financial advisors have been piling client money into variable annuities, structured products, private placements, and stocks. The Bull Market run is over and accounts that became over-exposed to equities through either stocks, mutual funds, annuities, or structured products, are bearing the brunt of this undisciplined approach. Herd mentality has caused more money to flow into the stock market than ever before and a lot of that money belongs to retirees in their IRAs and retirement nest eggs. Failing to diversify and asset allocate a retiree’s account is at a minimum, negligent, and could qualify for a FINRA Arbitration claim.
Stoltmann Law Offices has filed nearly 2,000 arbitration cases for investors over the year, recovering tens of millions of dollars of otherwise lost investment capital. Our experience in FINRA Arbitration is unmatched. Stoltmann Law Offices has prosecuted cases against banks and brokerage firms involving the failure to diversify and asset allocate, along with securities product cases. Now, the failure to asset allocate and diversify – the cornerstone of investment advice that is so easily overlooked – is costing investors, especially retirees, money they cannot afford to lose. Asset Allocation is the simple concept that investors should never have all of their eggs, or too many eggs, in one basket. Investments must be split across different asset classes like stocks, bonds, mutual funds, Exchange-Traded Funds, municipal bonds, commodities like gold and silver, and cash. The higher your risk tolerance, the more skewed this balance gets towards the equities and stocks side of the ledger. The more conservative, the less exposure you should have to stocks and equity-based mutual funds and ETFs. The reality is, maintaining an appropriate asset allocation takes discipline. As your equity portfolio grows in a bull market, the more concentrated you become in that high risk sector. Money should be continuously taken off the table during a bull market and re-allocated to more conservative, income producing assets like bonds.
The appropriate asset allocation depends on your risk tolerance, age, and time horizon and there are no hard and fast rules. There is plenty of guidance available from companies like Vanguard on appropriate asset allocations depending on your risk tolerance and objectives. Having more than 50% of your portfolio in stocks, as a retiree, would be a very high risk approach to say the least.
This is a scary time for investors and attempting to time the market will only likely lead to more losses, or missed opportunities. Because it has been so long since we’ve experienced a real bear market like this, it is a great time to fully evaluate your investment approach and to reflect on the advice you’ve relied on for the past several years. If you or someone you know has lost money because of poor investment advice, please contact Stoltmann Law Offices at 312-332-4200 for a free, no-obligation consultation with a securities attorney. We are a contingency fee law firm which means we do not get paid until you do!